By default, all objects are set to Walkable (terrain), Movable Obstacle, or Movable Phantom (phantom objects). You will need to set walls, trees, fences, etc to Static Obstacle. Set floors and other areas that need to be walkable to Walkable.

Don't forget to click apply! Then FREEZE your changes for the navigation mesh to update.

Terrain is always set to walkable. To prevent characters from entering areas of the terrain, use an Exclusion Volume

All objects that you want pathfinding characters to walk upon will need to be set to walkable in the Linkset tools floater. Walkable objects are green in the navmesh view.

You will need to Unfreeze before you can make any linkset changes to objects. Basic Setup > Unfreeze.

Pathfinding Character orientation will always be positive X.

All objects that are NOT going to be set to walkable should be set according to need:

Objects that you want ignored by the pathfinding characters - Movable Phantom (not visible in the navigation mesh view).

Avatars can move through or on, pathfinding characters cannot (this is also good for trouble spots where characters consistently get stuck) - Exclusion Volume seen as yellow opaque objects in the navigation mesh view.

Freeze your changes (edit/test window) to queue the regeneration of the navmesh and "bake" in the changes you have made. The text will change to "Navmesh is up to date" when it's finished.

Use the Show: navmesh tick box (and the world tickbox) to view the navigation mesh and see where you may need to make changes.

For the beta you'll need to disable (or make phantom) objects that change scale, volume parameters, or positon/rotation of child prims to get acceptable sim performance.
For help tracking down problems use:

Estate tools: Get top colliders and Get top scripts.

Pathfinding Linkset tools: search for the name of the object and teleport to it, take, delete, take copy, or turn on a beacon.